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May 20 — House Democrats and Republicans said at a hearing May 20 that they were deeply skeptical of the Federal Communications Commission's third attempt to enact net neutrality rules, with Democrats worried the proposal is too weak and Republicans worried it may be too strong.

Members of the Energy and Commerce Communications and Technology Subcommittee echoed the myriad concerns raised in recent weeks concerning FCC Chairman Tom Wheeler's proposal to re-establish Open Internet rules. Such regulations under the agency's 2010 Open Internet order were struck down by a court in January.

The May 20 hearing came a week after the FCC approved a notice of proposed rulemaking to seek comment on how the agency can enact rules that prevent Internet service providers from blocking or discriminating against online content.

“I believe under Section 706 anything that is anticompetitive or anti-consumer is competitively unreasonable and can therefore and should be blocked and that becomes the trigger for how you deal with paid prioritization.”

FCC Chairman Tom Wheeler

Democrats on the committee said they were generally concerned that Wheeler's proposal does not go far enough to protect consumers and Internet entrepreneurs from harm. Republicans, on the other hand, gave stern warnings that if the agency reclassifies broadband networks as public utilities under Title II of the Communications Act, the Internet would be irrevocably harmed.

Section 706

Wheeler told lawmakers he does not favor paid prioritization deals between ISPs and Internet content providers. He added that although the agency's Open Internet NPRM questions whether the FCC should reclassify broadband networks as public utilities, his proposal ultimately seeks to implement new rules using its authority under Section 706 of the 1996 Telecommunications Act.

“I believe under Section 706 anything that is anticompetitive or anti-consumer is competitively unreasonable and can therefore and should be blocked and that becomes the trigger for how you deal with paid prioritization,” Wheeler said. As for Title II, the NPRM asks the “specific question about, ‘Here is Section 706, here is Title II, let's compare and contrast them,’ ” he said.

Wheeler has struggled to re-implement the FCC's 2010 Open Internet rules, which were struck down in January when the U.S. Court of Appeals for the District of Columbia Circuit said the agency's no-blocking and non-discrimination rules too closely resembled common carrier regulations (Verizon Commc'ns Inc. v. FCC, D.C. Cir., No. 11-1355, 1/14/14).

Paid Prioritization Warnings

Subcommittee ranking member Anna Eshoo (D-Calif.) warned that if Wheeler decides to permit paid prioritization deals it would mark a “fundamental departure from the Internet as we know it.” On the other hand, reclassifying broadband under Title II could result in heavyhanded regulations, she said.

“I think we need a light, strengthful, touch in this, because the values are so essential,” she said.

Full-committee ranking member Henry Waxman (D-Calif.) said he had serious concerns about some aspects of Wheeler's proposal.

“I am opposed to any form of paid prioritization,” he said. “Paid prioritization divides the Internet into haves and have-nots.”

Waxman Probes Content Exclusivity Deals

Waxman queried Wheeler on his proposal to limit content exclusivity agreements that prevent broadband providers like Verizon, AT&T and Comcast from entering into arrangements that give exclusive advantages to their affiliates.

“What I don't understand is why this presumption against exclusive arrangements would be limited to affiliates,” Waxman said. “Suppose Netflix entered into an exclusive arrangement with AT&T or Comcast for faster speeds for videos, and to block competitors like Amazon Prime from getting similar services,” Waxman said. “I think that would be a serious threat to competition and an open Internet, yet your proposal does not create a presumption against these exclusive arrangements.”

Title II Said a ‘Poor Fit.’

Republicans roundly criticized Wheeler's decision to reopen the debate over Title II reclassification. “The modern communications landscape bears no resemblance to the world Title II was meant to regulate, and application of Title II to the Internet is, at best, a poor fit,” said Subcommittee Chairman Greg Walden (R-Ore.).

“The practical consequences of reclassification are to give the bureaucrats at the FCC the authority to second-guess business decisions and to regulate every possible aspect of the Internet,” Walden said. “Contrary to any intended effect, the reclassification of broadband service under Title II will harm consumers, halt job creation, curtail innovation and stifle investment.”

Subcommittee Vice Chairman Bob Latta (R-Ohio) said he plans to introduce legislation that would “prevent the FCC from following through on its misguided proposal” to enact new net neutrality rules.

Regulatory Fees From Google?

Rep. Marsha Blackburn (R-Tenn.) asked Wheeler whether the FCC should use its Open Internet proposal to charge Internet companies fees for their use of broadband networks.

“In the net neutrality context, companies like Google and Netflix want the FCC to act on their behalf and petition or visit the agency in support of those efforts but they free-ride because they are not paying the fees and bearing that part of the regulatory burden. Since they seem so ready and willing to rely on regulation to help them with those business models, how would you recommend those entities share in the costs of funding the agency?” she asked.

“We represent the people, not company A or company B,” Wheeler replied. “We have been told by the Congress who we can collect regulatory fees from and we do. If there is a decision to expand regulatory coverage over entities, that is obviously something we should do but that is a decision that is out of our hands.”

FCC to Investigate Peering

Wheeler confirmed that the commission will look into the regulatory implications of network interconnection, or peering, agreements between ISPs and network transit providers, though he did not offer a timeline.

Wheeler has declined to incorporate peering rules into his net neutrality proposal because he said it is a separate issue. Some net neutrality proponents called upon the agency to regulate peering agreements after Netflix Inc. agreed to pay Comcast and Verizon for more direct connections to their subscribers.

Eshoo and Rep. Doris Matsui (D-Calif.) urged Walden to hold a subsequent hearing to consider the proposed mergers of Comcast and Time Warner Cable, and AT&T and DirecTV.

“We feel like we are in the Wild West of the digital economy with all these mergers,” Matsui said. “Can you commit to say that the FCC will carefully scrutinize these deals?”

“Without hesitation and with complete affirmation,” Wheeler replied.

To contact the reporter on this story: Bryce Baschuk in Washington at bbaschuk@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

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